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Donaco ready to reset after horror year sees losses widen in FY19 on Cambodia impairment charge

Newsdesk by Newsdesk
Thu 29 Aug 2019 at 05:41

Donaco International's Star Vegas Resort & Casino in Cambodia

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Southeast Asian casino operator Donaco International Ltd says it is well positioned to leave the turmoil of the past 12 months behind and start to rebuild after completing a sweeping overhaul of the board earlier this month.

The full impact of the company’s recent woes was reflected in its bottom line on Wednesday with Donaco’s FY19 financial results revealing a statutory net loss after tax of AU$194 million for the 12 months ended 30 June 2019, primarily resulting from a non-cash impairment charge on the Star Vegas casino license due to ongoing litigation with the property’s land owners.

Likewise, the dramatic removal of Donaco founders Joey and Ben Lim from the Board last month and the series of events that led to it were a major reason for combined revenue at the group’s two casino operations – Star Vegas in Cambodia and Aristo International in Vietnam – declining 7.3% to AU$86.3 million and EBITDA by 43.2% to AU$29.6 million, according to Chairman Stuart McGregor.

“The full year results reflect the lack of professional management at the casino venues,” McGregor said, as well as “the fact that the Board was distracted by ownership and control issues.”

Those distractions have since been resolved with Lim’s shares now held by Hong Kong hedge fund Argyle Street Management Ltd, a new-look board in place and the appointment in June of former Resorts World Sentosa and The Star Gold Coast executive Paul Arbuckle as Group CEO.

Arbuckle hasn’t wasted any time identifying areas of concern, particularly at Star Vegas where net gaming revenue fell 9.9% to THB1.37 billion (US$44.6 million), non-gaming revenue by 19.0% to THB124.2 million (US$4.1 million) and EBITDA by 37.2% to THB610.2 million (US$19.9 million).

“Slot machine revenue declined by 24.5% following the changeover to newer slot machines, and this is unacceptable,” Arbuckle said. “Going forward we will revisit our lease arrangements on these machines and may look at revising profit-share arrangements, or purchasing these machines outright. Non-gaming revenue was down by 19%, with some further changes needed to boost the attractiveness of the non-gaming businesses.

“The EBITDA decline was due to a combination of the lower win rate, higher staff count required to replace staff that were poached by the Thai vendor, and higher marketing costs related to our events program, which drove the strong increase in visitation. We intend to look closely at the appropriateness of each of these aspects of the business.

“We have introduced a range of improvements for the 2020 financial year, and the early signs are encouraging with a strong July being recorded, which is flowing through into our August results to date.”

At Aristo, net gaming revenue fell 15% to RMB60.5 million, with non-gaming revenue down 25% to RMB45.3 million and EBITDA down 27% to RMB52.2 million.

“The first half of the financial year was challenging for Aristo, as it was impacted by a Chinese crime syndicate in July and August 2018, which threatened VIP junkets and customers on the Chinese side of the border and significantly impacted results in those months,” Arbuckle explained.

“However, in the second half of the year the business returned to more normal operating conditions. So whilst the full year results reflect the disruptions that occurred in July and August 2018, the operating performance has now recovered.

“This provides a good baseline for us to look to improve performance, and our license allows additional slot machines to be introduced, so we are looking to see how we can take advantage of this opportunity over the next few years.”

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The IAG Newsdesk team comprises some of the most experienced journalists in the Asian gaming industry. Offering a broad range of expertise, their decades of combined know-how spans multiple countries across a variety of topics.

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